UK spinout economy could be Reeves’ next growth lever
As Chancellor Rachel Reeves prepares to deliver her Autumn Budget, discussions of economic growth often centre on investment and fiscal levers.
However, an arguably equally powerful driver of economic growth operates within the nation’s universities.
Spinout ventures are turning ideas into viable businesses, attracting investment, generating high-skilled jobs and developing technologies with global reach. In 2024, investment in UK university spinouts reached a record £3.35bn, a 44 per cent increase on the year prior.
This surge reflects both renewed investor confidence and a growing recognition that research-based enterprises can produce tangible economic returns.
What’s more, many operate in sectors where the UK has a competitive advantage, spanning AI, deep tech, and life sciences.
From lab to market
Historically, the journey from lab to market has been far from straightforward.
Maria Leiloglou, chief executive of university spinout medtech venture EnAcuity, described the motivations behind her company’s tech, which helps surgeons to better assess tissue health during operations.
“I understood what a big difference this would make for women going through breast cancer surgery. They would go back to their normal lives much faster, with less complications,” she told Morning Wire.
Yet, even with a tech model positioned to transform real, quantifiable outcomes, early-stage obstacles remain acute.
“The number one challenge is definitely money”, she said. “I think if you have money, anything is possible. Investors want to see a company owning or having exclusive license of the patents before they commit.”
EnAcuity navigated these hurdles with support from university accelerators, enterprise fellowships, and grant funding.
Leiloglou added, “Your network is so important at that stage. If you find yourself amongst other motivated scientists, you also get much more momentum.”
Daniel Hulme, chief executive of AI spinout Satalia, also said: “It’s a cliche that the US is very good at networking. Networking is the lubricant of innovation. So the more perspectives, the more people who can get together with those different networks, those different expertise access, the better”.
Scaling a spinout introduces further challenges. Hulme spoke to Morning Wire about the growing intensity of “Investors now expect measurable progress every six months.”
Transparency in the sector has improved with the creation of the ‘UK spinout register’, which tracks university spinout activity and helps investors, policymakers, and universities see how the sector is performing.
Early-stage funding is increasingly available, but raising the multi-million-pound sums for regulatory approvals and commercial expansion remains hard.
A growth lever
Anne Lane, chief executive of UCL Business, told Morning Wire: “We connect people and ideas with investors, and give them the support to move from research into real-world impact. Universities let us keep income from intellectual property within the company so we can reinvest it”.
This ability to reinvest earnings while sharing profits with inventors, stakeholders, and funders aims to help reduce risk for early-stage ventures.
Spinouts have the potential to transform the economy if properly supported, turning public research funding into commercial activity.
Subsequently, this generates high-value jobs whilst strengthening the UK’s reputation in science and technology.
But government support, from proof-of-concept grants to scale-up funding, is still vital.
While recent measures, such as the UKRI £9m program to help academics become investor-ready, are positive steps, more action is needed.
For their part, universities could also make equity arrangements simpler and expand accelerator programs to ensure promising ideas move beyond the lab.
The IPO bottleneck
The UK’s struggling IPO market remains a critical constraint for spinouts as well.
While many companies have historically listed overseas, London is gradually emerging as a hub for tech and biotech listings.
According to a recent report by PwC, AI firms have driven a 44 per cent increase in the combined value of the world’s top 100 private tech firms, even as concerns grow that the AI boom could be overheating and Britain’s startups warn of a worsening funding climate.
The consultancy found that AI companies now account for 43 per cent of the total, overtaking fintech as the dominant sector for the first time.
Despite a sluggish IPO market and a string of recent sell-offs in listed AI stocks, PwC said the rebound in private valuations reflected a “stabilising macroeconomic backdrop” and the vast sums of capital still chasing growth stories in areas like gen AI, defence tech and space.
Hulme stressed that the UK now has the talent and growing ambition to back big ideas: “I think people are recognising that and investing in it. Historically, we might have gotten accused of only thinking small… I think we do really think big.”
He added: “I actually would like to see the public dialogue being much more positive about, about, about our ecosystem.”
But success will depend on investor readiness, regulatory support, and domestic listing opportunities.
Spinouts that reach this stage can deliver both financial returns and a reputational boost, proving the nation’s ability to grow companies from discovery to global markets.
As the Reeves’ Budget approaches, policymakers have the opportunity to recognise the significant but often overlooked impact of supporting them, which could offer the UK a path to sustainable economic growth.